tv Bloomberg Markets Americas Bloomberg November 22, 2016 10:00am-11:01am EST
vonnie: we will take you from chicago to divide and cover stories in the u.k., walls and washington. -- wall street and washington. we go straight to julie hyman, looking at economic data. existing home sales coming out an annual pace of 5.8 million homes. 5.4 4 million was the estimate from economists. this means a gain over 2%. that is better than the drop that was estimated. richmond fedhe manufacturing index coming in with the reading of cointreau, a rebound from negative for -- with a reading of cointreau --
4, a rebound from -4. all three averages are topping intraday highs with the dow at a very round number of 19,000. as we watch that go into record territory, we have been watching not only the dow, but also the s&p and nasdaq at record. this is not something that happens very often. take a look at the bloomberg. we are calling it party like it's 1999 because this is the first time since that year that all of these major averages have , andrecords simultaneously that trend is continuing from yesterday, into today. what is remarkable is how rapidly it has moved -- happened. at one point, the s&p 500 was registering 11% drop, -- was
registering an 11% drop. a very rapid turnaround just since the election. it is commodities helping to power stocks higher as producers rock -- rise in copper. tin and lead and iron ore in particular. sachs overweighting , itsdities, among those iron ore price forecast, copper trading at the highest july 15. we have this optimism about demand for infrastructure on suppose it infrastructure spending plans coming under a trump administration.
oil is rising, oil prices are up once again, not as large again by any means and bouncing around , but holding onto a gain of 3/10 of 1% -- of .3%. this is after we had representatives from libya and nigeria in vienna at this pulmonary talk for opec, expressing optimism that a deal is going to get done. mark: that optimism is boosting oil and gas prices. basic resources, highest level since june 2015. the basic resource index, quite a run since trump was elected, the best performing industry group on the stoxx 600 and since he was elected, the gauge itself up one half of 1%.
we have had gains and losses on an intraday basis. the stretch has come to an end. there will be no more of that statistic. let's get to the italian utility. buyback shares, selling assets, cutting costs and unveiling a big strategic land, focus -- big strategic plan, focusing on digitizing nation. it is preparing a share buyback option for as much as 2 billion euros. it is planning to boost its dividends in 2017 to 65%. shares are up by 3.2%. back to oil, brent rising for a third day. big optimism that opec is closing in on a deal.
very as meetings taking place and today, in vienna. we are getting progress according to a delegate from nigeria. this chart shows the price of brent crude, but it also shows the 15 day moving average. brent yesterday closing above the 15 day moving average since october 28. if we are talking on the upside, it is the first time the price seems to be moving higher and has risen through the 50 day moving average since the end of september. that is two months really quickly. let's stick with commodities because gold has not seen the biggest of months this november. through friday, investors pouring more than a billion dollars -- pulling more than billion dollars from the index. we know why, strong dollar and the expectation that the fed is
going to raise rates, next month. vonnie: as much uncertainty as there could be, let's check in on the first word news. trump hasnt-elect al spelled out his policy priorities in a new video on his first in office, he will take aim at a controversial trade agreement. >> i will issue notification of intent to withdraw from the transpacific partnership, a potential disaster for our country. fair,d, we will negotiate bilateral trade deals that brings job in -- jobs and industry back onto american shores. regulation,or every does gold ones must be scrapped. former cftc committee -- commissioner will lead they cftc landing team. may well, one of the trunk's advisor says he will not follow
through on his pledge to investigate hillary clinton over her emails. msnbcd not dispute an report that he would not pursue probes into clinton's email or private foundation. conway says it is perhaps a good thing if he getting help her heel -- if he can help her heal. in japan measured 7.4 instruct up the coast of upushima -- 7.4 and struck -- off the coast of fukushima. it also caused a small suwanee. british chancellor philip hammond will spend $1.2 billion to improve the country's broadband infrastructure. the plan would give 2 million more households access to fiber broadband.
global news 24 hours a day, powered by more than 2600 journalists. like we have been saying, trade is leaving no room for doubt that the fed will hike. 100%, now. itlier on daybreak americas, was said that we should look past market expectations for a december hike. is the100% probability market, that means that december should be a nonevent, except that it is about what they forecast in terms of the future pace of increases. they gaver last year, us four and this year, they will give us two. vonnie: joining us now from chicago is the founder and president of the younger , fixing commentaries
since 1990. talk to us about december. we had such movement in the market, already. it is one hundred percent, the market is fully into a reflation trade. the stock market is up, interest rates are up, commodities are up. the fed futures say 100%. that is what is priced in. the market should basically be unchanged if the fed does that. if there is deviation, and maybe the fed talks about 50 or maybe they talk about not going, then you will have a reaction in the market. what jeffrey rosenberg said is what we are looking for is the fed signals about the jerk pace of interest rate increases. what will we get from the fed? jim: i think that we are looking past the december meeting. if you look at the market,
they're pretty much thinking that that that is going to raise rates and it will be like last year. we will have to see if the fed gives us any signals that they will do anything other than what the market wants and to be honest, it will be hard for them. the fed spent all of 2016 trying to back the market into letting them raise rates through march, june and september and the market would not. i do think that the market has a veto over fed policy. when the fed decides it wants to do something, if the market does not price it in, they don't do it. they will give signals, but at the market does not buy in, it will not happen. mark: you are not convinced reflation is coming. what happens if you are wrong? jim: the market is convinced reflation is coming. if it doesn't, a couple of markets are mispriced. the stock market by most metrics is overvalued.
coming and there was a big earnings boost, the stock market would be in trouble. interest rates are way too high. the dollar is too high. industrial commodities have gotten ahead of themselves. the market is priced in, that the next set of economic data is going to be a lot better than the previous set. even with today's housing starts, it has not been that great. it has been a little below average. the market is betting that from here forward, it is going to be better. if it isn't, you will have a big adjustment in the other direction. mark: i have a chart that shows the amount of negative yielding bonds, worldwide and we have come down from the highs in june and the -- when the amount was over $12 trillion. now we are down to a mere $7 trillion. do you think we will ever get back to those two levels? jim: it is unclear.
i don't think they reflation trade is going to unfold like everyone thinks. you will probably see some kind of backing off and falling of rates. the bigger issue to understand about the negative rate thing is that my favorite -- all central-bank stimulus is fungible. it does not matter who does it. you have a lot of stimulus pumping through the system, through the bank of japan, the ecb and england. if the reflation trade comes and those central banks back off of their stimulus, that negative interest rate number is going to come down. if it doesn't, and they keep pumping out money, you will see it go right back up. that the reflation trade will not be as big as everybody thinks, but this is a high volatility trade. other, therer the
will be no real middle ground as we move forward. vonnie: to illustrate your thet, i'm showing 154, central bank balance sheet is presented of gdp, the red line is japan and the white line is the u.s. and the blue line is the ecb. major portions for the u.s. much lower than japan, but i want to ask you, is the u.s. economy in danger if we start getting fiscal stimulus, even at a time when the fed chair says it is too late? jim: danger, i don't know. if we were to get some fiscal stimulus and some tax cuts and get the big first of growth that the market is hoping for, do we get real inflation in the market? that is possible. even of the fed says they want to run a high-pressure economy, the problem is if we continue to get this first event nation expectations, bond yields will
soar and if they do, that might force the fed into acting. they can't sit on their hands and say this is good, we have some inflation, if the bond market is getting crushed. investors in bonds have been taking tremendous pains since the election, and if that continues, i think you will start to see that feed into the way that the fed policy is working. vonnie: thank you for joining us. mark: coming up, the dow topping 19,000 for the first time ever. we get a look at some of the biggest movers in the early u.s. session. this is bloomberg. ♪
mark: live from london and new york, i am mark barton. vonnie: and i am vonnie quinn. it is time for the latest business flash. buy an autoed to parts maker, the price, $4.5 billion. nissan owns a 2% stake and has ofn looking to spin off some its smaller businesses so we can focus on electric vehicles and self driving cars. u.s. auto safety regulators are allowing general motors to delay a large recall of to -- potentially effective airbags, giving the company time to prove the devices are safe and to avoid a huge financial hit.
in a bid to attract consumers, -- for nearly $2 billion. the soft drink maker says they will decrease earnings next year, but add to profits in 2018. that is your latest bloomberg business flash. let's head to julie hyman who is looking at some dow movers. julie: about 19000 and at a record. have many session, we potential movers, many of which are not -- except for bellowing, which is revamping its commercial jet unit, bringing an outsider in to -- that unit in the continue continuing restructuring of that company. no particular headlines. the gains we have been seeing in
oil prices has helped chevron, in particular. have caterpillar, which especially recently has been rising on optimism about infrastructure spending under a trump administration. unitedhealth group, gaining in part on optimism over changes, perhaps to the aca under the new administration and jpmorgan also rising with this latest increase in rates and also a presumed getting rid of the regulations of the banking industry. if you look at the best performers in the dow since 18,000, you will see some of the same suspects. united health on the list, jpmorgan, also mcdonald's, which has been undergoing this a as salesd as a company have improved, and microsoft also on the list.
if you listen to opec delegates, we are a whisper away from the deal, is that true? sam: everyone has been on board with this deal since it was first raised, and that is what the nigerian delegates said, today. however, it really is going to come down to the wire to see if every country in opec is actually going to go through with this when it comes to actually cutting their production by however much is required if they are all willing to do that. mark: let's talk about the minutia. crudet shows the level of which is the white line, the blue line is where they want to 32.5roduction to between and 30 million barrels a day and the blue line the goes up his current production. where all the falls going to land?
who will be carrying out the bulk of the production cuts? sam: that is the real question, and that is where we get to the disagreements. iraq and iran are the two countries to watch. together, they account for a quarter of opec. iran is being granted special measures to allow it to get to its pre-sanctioned output levels , but it is basically already there. also asking for an exemption and producing at a record high. if those countries don't get on board, then it will be a huge burden on saudi arabia and the other producers and they may not even go for it. vonnie: an illustration, to point people to the terminal.
that a beautiful function will show you how much each country does put out. is anybody talking about the president-elect donald trump and what might happen if sanctions were to be reimposed upon iran and what that might do to negotiation tactics? ; people have been discussing that. the question of whether or not president trump would reimpose sanctions on iran has been discussed widely in the region, and it would certainly have a big impact on iran oil production. he has given mixed messages. year -- deal last as with many things, with donald trump, we don't quite know what is going to happen, and it is one of those unknowns along with many others in the oil market. vonnie: iraq has been contesting
the numbers that are being used. they are not fully trusting of estimates. how do they get that resolved down to the wire? sam: this is one of those scrap and sees and points of disagreement involving iraq. they say they are producing -- discrepancies and points of disagreement -- points of disagreement involving iraq. the number that they starts from has to be agreed upon, first. mark: great job, we will see you soon. you are watching bloomberg. ♪
is bloomberg markets. checking in on the first word news. >> most americans say president-elect donald trump ultimately do a good job, according to a new cnn orc poll. or than 50% say he will do a very are fairly good job as president. 66% say he will bring change the country, but only 43% say it will be change for the better. new report concludes that islamic state terrorists have used chemical weapons at least 52 times since 2014 in iraq in syria -- in a rock and syria -- in iraq and syria. the group says the chlorine and mustard agents are most likely to be chemicals used in mosul . in turkey, the nationalist opposition party is about to support the president's bid for more power.
he wants to formally change the political system for a ceremonial presidency to a executive one. european union policymakers have stepped up their criticism of the uk's plans to leave a block -- leave the bloc. they say the pragmatist or appears clueless about the consequences of leaving as they prepare to begin brexit negotiations. a new report warns that british national health service is facing potentially crippling problems because of its biggest deficit, ever. the deficit is more than triple, to $2.3 billion in the most recent fiscal year. thatnding watchdog warned money needed to be right -- reallocated which may impact care. global news 24 hours a day powered by more than 2600 journalists.
vonnie: bank stocks have been rallying on speculation. bank rallied more than 13% since the election, two weeks ago. individual names like citigroup are up 11%. bank of america was up nearly 20%. they are also all in the top 10 stocks. is it time to add more leverage to your portfolio? you are upgrading some and downgrading others. this is not a universal call to take a good look at financials and dip your toe in. >> what we are looking to do is shift around exposures, rather than grow exposures.
looking at the financial space, there are some positive dynamics and a steeping yield curve, perhaps left -- less if not a stop to new regulation is a positive. we also expect further payouts in dividend groups. a catchsee right now is up trade as people are moving to market. i think that consensus is finally reaching a trough level. we have cut estimates for years, so as they start to come up, pes expand beyond that. having said that with this sharp of a rally, it is hard not to think that we have not stolen or pulled forward a lot of gains over the next couple of years. the universal banks have moved and moved to s&p around 80 from 75, so valuations are full, and that is why we are trying to shift around
exposures, the still be active and engaged for this rally, but not go too far with the space. vonnie: i'm curious as to what you think about the tailwinds that are coming. we are getting in interest-rate increase in december and perhaps you are regulations under donald trump -- and perhaps fewer regulations under donald trump. are they continuing good things or is this sort of a one-time benefit? david: i think they are a continuing benefit. the issue is you have to be careful on what will actually get done and be implemented. our view is a steepening yield curve and just hopefully the stimulus, not just for the banks but economic activity is the , and thater to banks was the key behind our upgrade of goldman sachs. if we have increased economic activity, there will be better capital markets and capital
raises, which will have a bigger lever. mark: you upgraded goldman sachs on outperform. you say events such as the election, exit, it may not favor a bank such as citi. elaborate on that. was a tough call. i think management has done a great job of reducing non-core and risky assets. capital deployment is going to be a big part of the story. there is a transition going on, a lot of investment in cards. if you think about the macro environment, if there is a cut iti doesrate taxes, c not have as much exposure to the relative to the group,
that is negative and that there is more discussion about tearing up global trade agreements, i'm not sure the best place to be positioned is global. the big concern about global trade is slightly negative and the cut in taxes, which is good for the space overall, is not actually good for them. mark: you say it is the leading franchise in the group, but is jpmorgan a franchise that is trading at a premium? david: when the stock got to about -- we felt that was a fair value for the company wanted to the other space, so it is extremely -- it has done extremely well in its rally, but it really is the franchise to go to in the space, i feel like there are other places to go to on relative valuation. vonnie: what about the revenue
mix? are there banks that are getting it right more than other banks? will business plans have to change in terms of having a new type of administration? it is tough, and the big picture, mr. trump has talked about repealing dodd-frank. we are not sure if that is going to happen, but he also talked about glass-steagall. when i think about business models from that standpoint, i am a little more concerned about goldman sachs as more of a traditional investment bank. thatyou think about citi, type of breakup becomes more problematic because i think the whole is worth more than the sum of its parts because a global payment franchise that drives jpmorgan, we are not a proponent of splitting up the j.p. morgan chase brand, but there is such a depth in
management, that it is also not the worst thing in the world that could happen. it is a good thing, but i think relative to the other space, they could repair for that and do that. we are not calling for glass-steagall, but there are mixed signals coming out of the president-elect. mark: we have seen a big outperformance in morgan stanley's shares, relative to the s&p 500, since february. you say you still like the stock. how is that? david: we upgraded the stock several times, we upgraded recently when it hit its low around $25. it, it is ank about proponent of both leverage to improve economic activity, goldman and morgan are underwriting equity capital --kets, so that is a big when you think about morgan stanley, their guidance for next 9% to 11% r.o.e.
with improved economic activity, and a cost cuts and restructuring, that will be another lever to increase estimates. morgan is a name that people want to get behind, it is a business model geared toward wealth management. they have a top-tier investment bank in our number one inequities. people are more bullish about that business model. vonnie: thank you for joining us, today. mark: coming up, we continue the conversation about banks. was wall street all glee when donald trump was elected? we will have those answers, next. ♪
vonnie: you are watching bloomberg. mark: this is your global business report. president-elect donald trump takes aim at free trade and says pulling u.s. support on the transpacific partnership will be a day one priority. vonnie: disney is shelling out big box to expand its theme park in hong kong, but would it mean a big boost to disney's bottom line? mark: why is deflation bad for an economy? and that could buy you more falling prices seem quite friendly. we explain what it could be toxic to global economies -- why it could be toxic to global economies. vonnie: on his first day in
office, president-elect donald trump will take aim at a controversial trade agreement. >> i'm going to issue notification of intent to withdraw from the transpacific partnership, a potential disaster for our country. instead, we will negotiate there, bilateral trade deals that ring jobs and industry back on to american shores -- bring jobs and industry back on to america's shores. brexit is back in the world seen in the u.k.. the number of dollar billionaires in the u.k. fell 15% after the vote. that vote rattle the stock market and said the pound falling. disney will spend one point $4 billion to expand its disneyland resort in hong kong. the expansion will include the first rosen and marvel themed attractions in its parks. disney theme parks are its
second-largest division after tv networks. a strike by pilots is threatening to ground flights during the holiday shopping season. the 250 pilots work for a subsidiary of airtran for services group, which operates 80 flights a day for dhl. they say they have to fly too much because the carrier doesn't have enough pilots. no comment from the airline. time for a bloomberg quick take where we provide context and background on issues of interest. today we look at deflation. what is the trouble with falling prices? why should we be afraid when the cash in your wallet buys more? in reality, it can hold spending and strangle borrowers. is the economy struggles to come back from behind -- 2009 -- the financial
crisis turn the global economy upside down. six years later, a slide in prices threatened to drag out the turmoil. central banks enacted unorthodox monetary policy. the ecb unveiled a bond buying program at negative interest rates. sweden and japan also introduced negative rates. consumer,can help the but only when it is limited and temporary. when prices drop across a wide range of goods over a long time, economic activity can screech to a halt. sliding prices squeeze profit margins and add to corporate and government debt burdens. if2014, it was warned that inflation is the genie, deflation is the ogre that must be fought decisively. central bankers find it easier to fight deflation -- fight inflation than deflation.
when prices rise too fast, policy makers raise interest rates and pullback. when prices fall too fast, it is trickier to recalibrate. too much easing could create bubbles. with the threat of deflation seemsfall, history -- small, history tells us it is a huge risk. that is your global business report. president-elect donald trump was on the campaign trail, he often pants -- painted .inancers as greedy criminals we spoke to a dozen executives about the sentiment on the street after the election. can donald trump follow on his promises to the financial community? there wasn't much grieving on wall street after the election victory. you might have thought there would have been after donald
trump painted financers as greedy criminals. >> you hit it on the head. when we spoke to people on wall street who just a couple of weeks ago were being mocked by members of aas global criminal cabal, we heard from one guy who said he spent 20 minutes devastated that hillary lost, and then he turned it around because he is about to get tax cuts and the industry will be deep regulated and that is great. even when i spoke to clinton fans who are worried about what the trump administration will meet for immigrants or muslims or women, one form of golds -- goldman sachs executive said those groups i am worried about, but when i think about my family and i, we will be in good shape thanks to donald trump. at least, he expects.
do people get depressed again if he takes a long time? >> one reason bank stocks have have,, and they really goldman sachs was up 15% after the election. . or go was up so high that it made up for the cfp be came out with the $100 billion fine -- wells fargo was up so high that -- ade up for the cfpb jesseok at things like hamilton's story in bloomberg, but also this one. she talks about how the position at the fed, they are sort of responsible for the -- for overseeing wall street. -- guy who was unofficially who unofficially had this job
because obama never actually put someone in because he was worried he would not be able to get them passed a republican senate. wall street is going to be thrilled. there is an expectation that not only is trump going to lower their taxes and deregulate, but he will put people into positions in the treasury and beyond that will be releasing pathetic. vonnie: is there any indication that the president-elect will try to pacify wall street if he does something that annoys thern that the president-elect will try to pacify wall street if he does something that annoys them? >> anyone that thinks they know what donald trump is going to do, i think is crazy. they so underestimated him in the primaries and the election, and i think for wall street to sort of think despite all of the populism on the trail that trump is going to give them everything they want when it comes to banking is a little crazy. hand, although there are mixed messages. -- republican class
republican platform has a new glass-steagall in it. on the other hand, he said he would try to get rid of dodd-frank or get rid of a lot of it. check out his story, today on bloomberg and bloomberg.com. tie-intill ahead, or a prime minister's to bloomberg and says the current prime minister should stay in power, even if they coming referendum is rejected -- even if a coming referendum is rejected. ♪
mark: by from london, and new york, i am mark orton with vonnie quinn. vonnie: italy faces a referendum vote on the prime minister's constitutional overhaul to speed up lawmaking. he pledged to resign in the case of a no vote. a former prime minister of italy was on bloomberg surveillance, explaining why he supports the
no vote. mistake byit was a , becauseister renzi -- hes a referendum on a has decided to overcharge the vote with so much of it has ancient, but that is something that he now, himself believes was wrong. nofor example, i would vote because i believe that the new constitution might make the process more cumbersome, complicated and uncertain, and also because i do not like the new senate, which will bring to national prominence, a political personality which has been highly corrupt.
, for one, the prime minister should continue. >> there was a realization when brexit happened that a vote against what has been proposed by the government means it is very unlikely that the government will stay. promised her renzi will have to step down? >> this is his own choice -- prime minister renzi have to step down? choice, andis own if he gives the impression that he might, that he might step --n, then renzit comes after a government? is it a technical government? is it snap elections?
mario: in case the no word to win, i would expect mr. renzi to stay on. if he wanted to leave, i would expect a president of the republic to form a new government with a new prime minister, but very much from the same centerleft political spectrum which is now renzi majority. they would be, in my view, no early elections, staying where they are supposed to stay in 2013, and there would be a continuation of current policies, and i should say, and i have been one of the most convinced supporters of mr. renzi's prime minister -- mr. renzi as prime minister, that the policies of mr. renzi in the past two years have been quite
different from the initial ones. initial ones included a labor market reform that although it has not given proof of brilliant results so far, i believe it is in the right direction. years, i musto say that the base of economic reforms has slowed down, a lot. vonnie: that was former italy prime minister mario monti. next, energyup companies leading stocks higher, the dow topps 19,000. take a look at european stocks. 34 minutes away from the end of the tuesday session. stocks are rising, the highest in almost a month, led by minors. this is bloomberg. ♪
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mark: it is 11:00 a.m. in new york, midnight in hong kong. 30 minutes left in the trading day. vonnie quinn in new york, this is the european close on bloomberg markets. ♪ taking you from london to hong kong. covering stories out of berlin and wall street and washington. here is what we are watching today. global stock markets rallying, the dow jones topping 19000 and european stocks getting a boost from mining. energy shares will have an investor outlook on stocks and bonds this hour. vonnie: donald trump lays out his first 100 days. it includes the withdrawal from the transpacific partnership and canceling what he calls job killing regulations.